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In human resources or industrial psychology, 360-degree feedback, also known as multi-rater feedback, multi source feedback, or multi source assessment, is feedback that comes from members of an employee's immediate work circle. Most often, 360-degree feedback will include direct feedback from an employee's subordinates, peers, and supervisor(s), as well as a self-evaluation. It can also include, in some cases, feedback from external sources, such as customers and suppliers or other interested stakeholders. It may be contrasted with "upward feedback," where managers are given feedback only by their direct reports, or a "traditional performance appraisal," where the employees are most often reviewed only by their managers.
The results from a 360-degree evaluation are often used by the person receiving the feedback to plan and map specific paths in their development. Results are also used by some organizations in making administrative decisions related to pay and promotions. When this is the case, the 360 assessment is for evaluation purposes, and is sometimes called a "360-degree review." However, there is a great deal of controversy as to whether 360-degree feedback should be used exclusively for development purposes, or should be used for appraisal purposes as well.
The German military first began gathering feedback from multiple sources in order to evaluate performance during World War II. Others also explored the use of multi-rater feedback during this time period via the concept of T-groups.
One of the earliest recorded uses of surveys to gather information about employees occurred in the 1950s at Esso Research and Engineering Company. From there, the idea of 360-degree feedback gained momentum, and by the 1990s most human resources and organizational development professionals understood the concept. The problem was that collecting and collating the feedback demanded a paper-based effort including either complex manual calculations or lengthy delays. The first led to despair on the part of practitioners; the second to a gradual erosion of commitment by recipients.
However, due to the rise of the Internet and the ability to conduct evaluations online with surveys, Multi-rater feedback use steadily increased in popularity. Today, studies suggest that over one-third of U.S. companies use some type of multi-source feedback. Others claim that this estimate is closer to 90% of all Fortune 500 firms. In recent years, Internet-based services have become standard in corporate development, with a growing menu of useful features (e.g., multi languages, comparative reporting, and aggregate reporting).
A study on the patterns of rater accuracy shows that the length of time that a rater has known the individual being evaluated has the most significant effect on the accuracy of a 360-degree review. The study shows that subjects in the group “known for one to three years” are the most accurate, followed by those “known for less than one year,” followed by those “known for three to five years” and the least accurate being those “known for more than five years.” The study concludes that the most accurate ratings come from those who have known the individual being reviewed long enough to get past the first impression, but not so long that they begin to generalize favorably.
It has been suggested that multi-rater assessments often generate conflicting opinions and that there may be no way to determine whose feedback is accurate. Studies have also indicated that self-ratings are generally significantly higher than the ratings given from others.
Several studies indicate that the use of 360-degree feedback helps to improve employee performance because it helps the evaluated see different perspectives of their performance. In a 5-year study, no improvement in overall rater scores was found between the 1st and 2nd year, but higher scores were noted between 2nd and 3rd and 3rd and 4th years. Reilly et al. (1996) found that performance increased between the 1st and 2nd administrations, and sustained this improvement 2 years later. Additional studies show that 360-degree feedback may be predictive of future performance.
Some authors maintain, however, that there are too many lurking variables related to 360-degree evaluations to reliably generalize their effectiveness. Bracken et al. (2001b) and Bracken and Timmreck (2001) focus on process features that are likely to also have major effects on creating behavior change. Greguras and Robie (1998) tracked how the number of raters used in each particular category (direct report, peer, manager) affects the reliability of the feedback. Their research showed that direct reports are the least reliable and, therefore, more participation is required to produce a reliable result. Multiple pieces of research have demonstrated that the scale of responses can have a major effect on the results, and some response scales are better than others. Goldsmith and Underhill (2001) report the powerful influence of the evaluated individual following up with raters to discuss their results. Other potentially powerful factors affecting behavior change include how raters are selected, manager approval, instrument quality (reliability and validity), rater training and orientation, participant training, supervisor training, coaching, integration with HR systems, and accountability.
Some researchers claim that the use of multi-rater assessment does not improve company performance. One 2001 study found that 360-degree feedback was associated with a 10.6 percent decrease in market value, and concludes that "there is no data showing that [360-degree feedback] actually improves productivity, increases retention, decreases grievances, or is superior to forced ranking and standard performance appraisal systems."
Maury Peiperl of Stanford's General Management Department, proposed four paradoxes that explain why 360 evaluations do not elicit accurate data: The Paradox of Roles, in which an evaluator is conflicted by being both peer and the judge; the Paradox of Group Performance, which admits that the vast majority of work done in a corporate setting is done in groups, not individually; the Measurement Paradox, which shows that qualitative, or in-person techniques are much more effective in facilitating change; and the Paradox of Rewards, which shows that individuals evaluating their peers care more about the rewards associated with finishing the task than the actual content of the evaluation itself.
Additional studies found no correlation between an employee's multi-rater assessment scores and his or her top-down performance appraisal scores (provided by the person's supervisor), and advised that although multi-rater feedback can be effectively used for appraisal, care should be taken in its implementation. This research suggests that 360-degree feedback and performance appraisals get at different outcomes, and that both 360-degree feedback and traditional performance appraisals should be used in evaluating overall performance.